[OPEL:6217] What is the debate is about?

Alan Freeman (a.freeman@greenwich.ac.uk)
Tue, 24 Feb 1998 13:06:06 +0000

What is the debate is about?

Now that's an *interesting* question.

I think there are two debates, and the discussion oscillates between them.

The first debate is a straightforward (if one can call it that) debate
between two different paradigms. Each uses the same words but the words
mean entirely different things. When a temporalist uses such terms as
price, value, profit, surplus-value, revenue, capital, determination,
monetary expression of labour, even abstract labour-time, s/he simply
doesn't mean the same thing as when the same words come from the pens or
keyboards of David, Fred, Duncan, Bruce, or (going outside of OPE)
Steedman, Pasinetti, Schefold, King, Morishima, Okishio, Winternitz, Seton,
Sweezy, or Bortiewicz and, therefore, argues that the conclusions these
writers draw are valid only for the very restricted range of circumstances
under which their concepts are valid.

The argument about Okishio's theory of the tendency of the rate of profit
to rise (TRPTR) is not, therefore, a discussion on whether is a correct
logical deduction (it is), but whether the concept of 'profit' it employs
(the general concept in use in economics both hetorodox and orthodox) may
apply to the real world. I argued [OPE-2886 thru' OPE 2888] that there is
no possible real world to which this theorem could apply, because the
theorem is a theorem about changing technology, but the definition of
profit adopted is valid only for a constant technology.

When one replaces Okishio's definitions with a definition that conforms to
his stated assumptions, one finds that the rate of profit falls, where he
says it rises. In this sense, I consider it has been refuted.

I suspect that one of the problems is that we fail to appreciate just how
unusual it is to have two paradigms on the same list. It is very difficult
to achieve a meaningful discussion between two views that use the same
words for completely different things and there is always the possibility
of error, if the effort required for this is underestimated.

In my view we cannot settle much and shouldn't seek to do so; rather we
should seek to get the greatest clarity about what each of our paradigms
means and implies.

However I think there is a second debate which has gotten much messier,
perhaps because it is not generally understood how deep are the
differences, This concerns whether the different paradigms and their
meanings are even allowable, either as statements about the world, or as
readings of its scholars. The general tendency in economics is to take
simultaneist or equilibrium readings not merely as the 'best' but as the
only permissible ones. In common langauge, this takes the form of asserting
something that is contestable, as if it were obvious.

In the history of economics, as noted, this is more systematic and
constitutes a very successful supressive project. Wherever, and whenever
temporalism crops up, it has always been stamped out and either disallowed
as logically impossible, or replaced with a simultaneist version of the
same thing.

In support of this, since 'stamping out' might appear a strong phrase and
the M-word causes offence, let me cite some new authorities:

"On the plane of theory the main point of the "General Theory" was to break
out of the cocoon of equilibrium and consider the nature of life lived in
time, the difference between yesterday and tomorrow, ehre and now, the past
is irrevocable and the future is unknown. This was too great a shock.
Orthodox [neoclassical] theory managed to wind up in a cocoon again...In
the Keynesian theory after the war this simple point is lost. The whole of
Keynes's argument is put to sleep. Keynes is smothered and orthodox
equilibrium theory is enthroned once more." (Joan Robinson, Collected
Economic Papers V, MIT Press,Boston 1980:121)

Or perhaps consider Mary Morgan's 'The Stamping out of Process Analysis in
Econometrics' [sic]
(Blaug and de Marchi (1994) (eds) "Appraising Economic Theories",

This explains that in the battle between the recursive approach of Wold and
the simultaneous approach of Haavelmo [Morgan's words]:

"There was no obvious intellectual victory in the debate, yet there is no
doubt that process analysis was effectively squashed out of
econometrics"(op citp255).

Wold had written:

"Pure causal chains are completely dynamic, all relations of the system
being behavioural relations, the propositions on equilibrium tendencies
being implications of the model, and no equilibrium assumptions entering in
the construction of the model. The residuals enter as unspecified forces
taht interact with the specified driving forces of the model and prevent
the system from every reaching a state of complete rest.

"Interdependent systems and conditional causal chains mark a drastic cut in
the aspiration level of a completely dynamic approach. The introduction of
equilibrium assumptions is a key device, a shortcut that refrains from
obtaining the equilibrium as a deductive implication of the model. There is
no objection aginst the shortcut as such, for it is a good thing to have
models that work at different aspiration levels. It is rather tha owing to
their mixed static-dynamic nature the approaches are of limtied scope for
purposes of dynamic inference. What in particular is a serious limitation
is that every equilibvrium assumption is an approximation that ignores a
potential driving force of the model. To assume instantaneous equilibrium
between demand and supply is to ignore changes in stocks; to equilibriate
savings and investments is to ignore the unplanned changes in money
holdings and inventories, and so on. In reality, according to observed
facts, such disequilibrium gaps are often quite considerable and to
disregard them in model construction is in conflict with basic arguments"

The question to be confronted is this: why is it that the patently sensible
distinctions made by Keynes, Wold, Frisch, Tindbergen, and countless
others, between genuine dynamic and comparative static results - leading to
the refutation of the core principles of orthodoxy such as the quantity
theory of money, the rising rate of profit, the absence of liquidity
preference, market clearing, convergence, pareto optimality etc etc etc -
that the fully rigorous refutations of these core principles provided by
the temporal alternatives are never answered but always set aside and
'stamped out'?

To my mind, because economics as it stands now is not a science, but a
machine for suppressing it.

I think that if we could agree on this point, it would greatly improve
the discussion on the first point; since it would remove, once for all,
the validity of any appeal to what is considered as commonsense,
well-established, or intuitively reasonable by economists; indeed, it
would lead us to suspect any intuition arising from exposure to economics
before we suspected anything else. We would then be forced to discuss,
without prejudice, the actual arguments being advanced.